Daily Comment (November 25, 2016)
by Bill O’Grady, Kaisa Stucke, and Thomas Wash
[Posted: 9:30 AM EST] Uncertainty continues to plague the European Union as a result of growing populist movements. Today, Turkish President Recep Tayyip Erdogan threatened to allow refugees to enter Europe after the European Parliament voted to stop talks regarding Turkey’s admission into the EU. Turkey has received a lot of criticism from the EU for its brutal crackdown following the failed coup earlier this year. If Erdogan were to carry out this threat it would strengthen populist movements throughout the EU. Populist leaders such as France’s National Front Leader Marine Le Pen, who plans to immediately withdraw France’s membership from the EU if elected, have exploited peoples’ frustrations with slow economic growth and growing immigration. If populism were to take hold throughout Europe it could lead to the end of the European Union.
The stock market rally is continuing to rise to new highs. President-elect Trump’s proposals to increase infrastructure spending and tax cuts along with business deregulation have been met with optimism about possible economic growth. A lot of this growth in optimism can be attributed to beliefs that he is more flexible than most people gave him credit for during the election. He has recently softened his stance on climate change, Obamacare and immigration.
There is still uncertainty within the oil markets as Russia has only committed to an output freeze and Iran is looking for an exemption. As a result of this uncertainty, Saudi Arabia has pulled out of “non-OPEC” meetings. Even though it is widely perceived that an agreement will be reached before November 30, there is growing pessimism within the market.